SPYI Crosses $250 Million in AUM | ETF Trends

It’s been a surprisingly resilient year for equities despite aggressive Fed interest rate hikes and economic slowing. Advisors and investors looking to up their equity allocations while increasing monthly income potential continue to flock to the NEOS S&P 500 High Income ETF (SPYI) as the fund crosses $250 million in AUM.

SPYI launched nearly one year ago on August 29, 2022. The fund crossed $250 million in AUM on Thursday, August 17, 2023, as investors increasingly embrace options strategies within equities to enhance income.

Beginning in June, when the Fed paused for a month on interest rate hikes and the outlook for equities began to lift, the fund experienced a surge of consistent inflows that continues through mid-August.

The NEOS S&P 500 High Income ETF (SPYI) capitalizes on core equity allocations while also providing a tax-efficient income stream for portfolios. The ETF is well positioned to capitalize on income opportunities in the S&P 500 as the index rises. It also offers tax-efficient income, which can be a boon for portfolios during periods of economic weakening.

See also: “Don’t Sleep on SPYI’s 12% Distribution Yield in Equities

Seek High Monthly Income in Equities With SPYI

Price and total return chart for SPYI YTD. The fund is up 5.01% on a price basis and 12.68% on a total return basis.

SPYI has a distribution yield of 12.10% as of 07/31/2023. The fund also has a 30-day SEC yield of 0.97% (doesn’t include options income).

SPYI seeks to provide higher income through call options the fund writes and earns premiums on. It then can use the money earned from the written calls to buy long, out-of-the-money call options on the S&P 500 Index.

An out-of-the-money call option has no intrinsic value. That’s because the current price of the underlying asset is below the strike price of the call. Should equities rise or fall, NEOS can actively manage the call options to capture gains in the underlying assets or minimize losses.

The options that the fund uses are index options, taxed favorably as Section 1256 Contracts under IRS rules. Options held at the end of the year are treated like they were sold on the last market day of the year at fair value. Any capital gains or losses are taxed as 60% long-term and 40% short-term, no matter how long investors held them. This can offer noteworthy tax advantages.

The fund’s managers also engage in tax-loss harvesting opportunities throughout the year on the call options, equity holdings, or both.

SPYI has an expense ratio of 0.68%.

For more news, information, and analysis, visit the Tax-Efficient Income Channel.